A look at the day ahead in U.S. and global markets from Mike Dolan
Both long-term borrowing rates and riskier growth stocks of the Big Tech universe have climbed in tandem this week, a peculiar coincidence in price trends that typically offset each other.
While it's often dangerous to over-interpret a few days of market developments, some argue investors are gradually pricing a more durable high-pressure economy ahead - one where demand and earnings growth stay brisk and keep credit policy and interest rates tight over the horizon.
Or it may just be a series of idiosyncratic news events.
Either way, it was enough to hand Wall St stocks their best day of the month on Monday just as 10-year Treasury yields eye recent 15-year highs again above 4.3% ahead of today's auction of new 10-year paper.
Although both stock futures and bond yields edged back a touch again on Tuesday ahead of the bell, the fact they are moving in tandem ahead of a critical week for macro policy is notable.
Curiously, it was the traditionally most interest-rate sensitive sectors that led Monday's stock rally, with the NYFANG+ index of mega cap tech and digital giants clocking a daily gain of more than 2% for the first time in September.
That jump was led by Tesla (NASDAQ:TSLA)'s 10% surge after Morgan Stanley upgraded its stock recommendation to "overweight" and said its Dojo supercomputer could boost the company's market value by nearly $600 billion.
The renewed excitement about a quantum leap in artificial intelligence also saw Meta Platforms (NASDAQ:META) advance more than 3% after a report it was working on a more powerful AI system.
Recovering somewhat from the China-related hit last week, Apple (NASDAQ:AAPL) stock also rebounded as it prepared to launch its latest iPhone on Tuesday and signed a new deal with chipmaker Qualcomm (NASDAQ:QCOM) for the supply of 5G modem chips at least until 2026 - before a previous agreement ends this year.
Cutting across that tech optimism overnight, however, were below-forecast estimates from Oracle (NYSE:ORCL) - whose stock fell almost 10% after the bell as it flagged how a tough economy pressured cloud spending by businesses.
That sort of mixed messaging faces the Federal Reserve as it prepares to meet next week, with two critical macro updates to review over the next couple of days - the August consumer price inflation report on Wednesday and retail sales on Thursday.
Before we get there, investors await the often overlooked NFIB small business survey for last month - not least to see whether credit tightening is starting to bite beyond the mega caps for a part of the economy that employs more than half of all U.S. workers.
Overseas, European markets held up as this week's European Central Bank meeting is awaited with economists split on its outcome.
China stocks closed marginally in the red but there was some relief as the country's largest private property developer Country Garden won approval from its creditors to extend repayments on six onshore bonds by three years.
Britain's pound inched lower after data showed the UK labour market weakened even as wage growth stayed strong in July, painting a messy picture ahead of the Bank of England's decision on rates next week.
The dollar was firmer more generally.
London-listed shares of Smurfit Kappa slumped 11% after the company agreed to combine with WestRock (NYSE:WRK), to create one of the world's largest paper and packaging producers worth nearly $20 billion.
Events to watch for on Tuesday:
* U.S. NFIB Aug survey of small businesses
* U.S. Treasury auctions 10-year notes
* U.S. corporate earnings: Optical Cable Corp, Altamira Therapeutics, InnovAge, Lesaka Technologies, Cognyte, Farmer Bros, Edgio, MamaMancini's
(By Mike Dolan, editing by Ed Osmond, mike.dolan@thomsonreuters.com. Twitter: @reutersMikeD)